Daily Market View – 5.12.2018

Asia

Japan’s service sector presented a lower PMI in November, down a click to 52.3 and schlepping the euro down with it. The yen rose steadily throughout the day, receding a 1/3 of the way as the Asian session got under way and is currently bouncing off a 2-week pressure zone in the 88-40 region. Indexes dropped sharply as investors began asking themselves what was in store vis-à-vis the post handshake period. What olive branches can the beleaguered Chinese economy afford to extend trump, that will postpone his tariffs beyond its new grace period? In an aside, the Caixin services PMI last night showed a 3 point improvement, placing it way into expansionist territory at 53.8.

Europe

The pound received a welcome jolt in the arm yesterday after the European court ruled that Britain can unilaterally halt the Brexit process at any time and with no immediate sanctions. Adding to the fanfare was an unexpected upswing in construction data – the pmi up a fifth of a point to a 4-month high. The joy was short-lived and the coin has lost all 50 pips it gained after Bank governor mark carney warned that a no-deal Brexit could cause a 10% increase in food prices OVER a 25% plunge in the UK pound. Across the region, indexes lost steam – also apparently on profit taking to the tune of a percent more or less across the board. PMis were up 4.9%, a point 3 percent improvement over October; and Italy has said that 2% is the lowest it can go on its budgetary deficit

US

The dollar this morning is up on equities crashing – the Nasdaq down 3.8% and the Dow 3.1. Investors Business Daily published a consumer sentiment downswing from 56.4 in November to 52.6 for this month. Fed members are showing some elasticity over a December rate hike, Jerome powell yesterday calling for patience and steve Kaplan suggesting data guidance, rather than abiding by a specific timetable.

Commodities

Gold hit a month-long high of 12-47 overnight before settling back to its new support level at 12-39. And oil continues trending sideways at 52 – 54 ahead of tomorrow’s OPEC Russia meeting, where a one million daily barrel production cut is expected to come into play. The API reported another 5.36 million barrel upswing in inventories.

Events

Ahead today, more PMIs from Europe with retail sales in at 10. US mortgage approvals will be in at noon followed by a Canadian interest rate decision at 3. At 10 to 12, Japan’s foreign investments, and Australia’s trade balance ends the day 40 minutes later.